FX Analysis – USDJPY, and GOLD reaction after a surge in the Dollar

USD rallied strongly in Thursday’s session after a quiet start following dismal demand for US 30 year-treasuries at a scheduled bond auction, seeing yields surge and taking the USD with them. The push higher was later given an extra boost by Fed Chair Powell’s hawkish statements during a panel organized by the IMF.

In a scheduled panel chat the FOMC head said that “policymakers are not confident that they have achieved a sufficiently restrictive stance to return inflation to the 2.0% target in a sustained manner.” That was enough to see the USD bulls take charge with DXY up 0.4% for the day, while yields also spiked, this saw some volatility in USD cross pairs and gold we’ll look at the highlights in the charts below.

USDJPY TECHNICAL ANALYSIS

USDJPY pulled back last week after the BoJ tweak to their YCC saw Japanese bond yields rise, giving the Yen a boost. However, as has been the case with this pair in the last 12 months the uptrend quickly resumed, with USDJPY breaking back above the key 151 level and heading towards its 2022 and 2023 high of 151.72. At these levels there is always the threat of a BoJ currency intervention, so traders will need to keep an ear out for any jawboning from BoJ members telegraphing such a move.

If the BoJ steps aside a test of the upper trend line at 154 could be a possibility. If they do step in we could see a decline to a 146 handle and lower trendline before finding any technical support.

GOLD TECHNICAL ANALYSIS

Gold has reversed lower this week after the upward momentum failed at the key 2010 resistance level. Risk premium priced into gold also started to unwind after gaza conflict haven flows pushed the price rapidly higher from early October. Thursday session did see a modest bounce, despite a rampant USD which could give the bulls some hope, however the 23.6 Fib level, which acted as short-term support on the way down now seems to have switched to resistance. This will be the level on the upside to watch (1963.78), the next resistance from a technical point of view will be the 2010 level. To the downside the 38.2 Fib at 1934.79, which also matches up with the 200 day SMA looks to be the first real support level.